Understanding Unsecured Debt Relief

Unsecured debt relief refers to getting help with debts that are not guaranteed by collateral. To understand your options for getting relief from unsecured debt, it is important you understand the difference between secured and unsecured liabilities.

Secured Debt versus Unsecured Debt

Secured debt is debt that is guaranteed by some type of collateral. The collateral is a tangible material object that the lender can take and resell to get its money back if you do not pay what is owed. For example, secured debt may include:

• Your mortgage (the house is the collateral)
• Your car loan (the car is the collateral)
• Loans for furniture and/or jewelry (the furniture or jewelry item are the collateral)

Unsecured debt, on the other hand, is debt where the creditor has nothing but your word- they aren't lending you money for something that they could recapture and sell. Unsecured debt includes:

• Medical bills (they can't repossess the treatment)
• Student loans (a lender can't take back your degree)
• Credit card debt (you could charge anything, from a vacation to groceries- and the lender would have no way of getting money back if you didn't pay for those items)

Unsecured debt is usually much easier to get rid of or settle for less, since the lender doesn't have any easy or obvious recourse for getting the money back from you when you default; other than filing a lawsuit and hoping you have the cash or income to pay the judgment. (See also Sued for Unsecured Debt).

Options for Unsecured Debt Relief

When you can't pay your unsecured debt, you have a few options for getting rid of it. These include:

• Filing bankruptcy. With a chapter 7, you can get rid of most unsecured debts (except for things like student loan debt or unpaid child support) after your assets are sold. With a chapter 13, you can negotiate the unsecured debt down and repay it over 3-5 years
• Debt settlement. This involves getting your creditors to agree to let you pay back less than the total you actually owe, usually in a single lump sum payment but sometimes as part of a payment plan

Getting Help

Because unsecured debt relief is usually easier to get than secured debt relief, you should strongly consider getting help if you are dealing with too much debt. An experienced lawyer can explain to you what your options are for settling unsecured debt or for finding debt relief, and can help you to deal with your debt in the best way possible given your financial situation.